Pursuant to a congressional request, GAO reviewed user fees paid to the Health Care Financing Administration (HCFA) for Clinical Laboratory Improvement Act (CLIA) activities, focusing on the: (1) CLIA program budget history, including their rationale for recent fee increases; (2) allocation of increased fees across laboratories and states; and (3) information HCFA provided to states on CLIA program operations and the recent increase in fees.

GAO noted that: (1) when HCFA first implemented the CLIA amendments, the agency overestimated the numbers and types of laboratories in the United States, and set user fees too low to cover all planned program activities; (2) anticipating a shortfall, HCFA officials accelerated billing to meet the program's cash flow needs and curtailed expenditures through efficiencies and deferred program operations; (3) as a result, the funding shortfall did not materialize; (4) however, to avoid long-term loss in CLIA's capacity to ensure laboratory quality, the agency increased laboratory user fees in 1998, and began funding deferred program activities; (5) the largest increases were assessed on the highest-volume laboratories; (6) the following year, fees were increased for approved states, requiring them to pay a greater proportion of CLIA's total administrative costs than had been the case in the past; (7) officials in these states have questioned HCFA's legal authority to impose these fees; (8) in response, HCFA officials maintain that approved states derive benefits from the national program and note that they are required by regulation to pay a prorated share of general administrative costs; and (9) in communicating with state officials regarding CLIA, HCFA was generally responsive to requests for program and budget information, but the agency did not provide timely notification of the amount of the recent fee increase.